MANAGERIAL ACCOUNTING AS A DRIVER OF FINANCIAL PERFORMANCE AND SUSTAINABILITY IN SMALL AND MEDIUM ENTERPRISES IN PAKISTAN

Abstract

The principal objective of the study is to examine the impacts of financial and sustainable performance of small and medium-sized businesses (SMEs) and how management accounting practices influence them. The quantitative research design was used and the primary data was obtained among 412 participants working in agriculture sector of Pakistan. The analysis of results was carried out on the SMART PLS software. The analysis by reliability showed that there was acceptable internal consistency as the values of Cronbach alpha varied between 0.62 and 0.89. Confirmatory factor analysis showed the adequacy of the model with a rather large chi-square/df ratio, and discriminating validity presence demonstrated that the constructs differed. In further regression results, costing practices were found to have the highest impact on financial performance (beta =0.754; p < 0.001) and sustainability (beta = 0.771; p < 0.001), and then budgeting practices, which were also statistically significant with positive coefficients. The impact of decision support systems on financial performance was also positive (β = 0.575, p = 0.013) though not significant on sustainability (p = 0.131). All in all, the findings indicate a small but still positive and important correlation between the management accounting practices and small and medium business performance. This study is important because SMEs constitute about 90 percent of businesses in the world and it is one of the biggest employers. Implementation of the management accounting in the SMEs will not only improve financial results, it will also help make sustainability viable in the long-term improvements in efficiency and resilience.